RBI Recalibrates CPI: New Series to Reshape Inflation Tracking

The Reserve Bank of India is shifting to a new CPI inflation series based on 2024 prices, designed to better capture household consumption patterns and reduce volatility. With expanded coverage of 358 items, the series aims for more accurate inflation estimation amid an impending review of the inflation targeting framework.

The Reserve Bank of India (RBI) is set to adopt a new Consumer Price Index (CPI) inflation series based on 2024 prices, RBI Governor Sanjay Malhotra announced. This move is aimed at providing a more accurate reflection of Indian households' consumption patterns, thereby reducing inflation volatility.

The updated CPI series, released by the Ministry of Statistics and Programme Implementation, now tracks the prices of 358 items, up from 299 items in the previous series. The new CPI series recorded a 2.75 percent retail inflation in January, marking a departure from previous measures and indicating volatility within the RBI's tolerance band of 2-6 percent, which is being taken into account for future policy projections.

With the central bank's flexible inflation targeting framework under review, the RBI is considering stakeholders' feedback while recalibrating its inflation targets. The next CPI estimate in April will reflect the methodical changes, and discussions continue between the RBI and the government on setting a future CPI target.

(With inputs from agencies.)